With more businesses coming up now more than ever, there's still need for small business owners to continually equip themselves with the tools and skills to help them attract investors. Here's how SMB owners can make their enterprises attractive to investors.
Small business funding continues to be a thorny issue for many entrepreneurs, even after years of awareness programs and increased funding opportunities from different platforms, including banks, governments, angel and venture capital firms, and newer platforms such as Initial Coin Offerings (ICOs).
To illustrate, in one 2017 survey, about 67 percent of small business owners in the U.S. identified lack of capital and cash flow as their biggest challenge when looking to grow, even after successfully raising sufficient funds to launch their businesses. This challenge is further compounded by a high number of new ventures that have been coming up in recent years, making these funding opportunities more elusive.
To that end, there's still need for small business owners to continually equip themselves with the tools and skills to help them attract investors. Here are two passive but effective ways that small business owners can apply to make their enterprises attractive to investors.
Build a solid brand story
Storytelling is one of the oldest and most powerful marketing strategies. According to one analysis, sharable content – your brand story by extension – can be especially effective for businesses with small marketing budgets that are looking to get the word out about their enterprises.
In addition to helping you land customers, a brand story can be an effective way to help investors connect with your business, even without stepping into a single investors' conference.
A solid and authentic brand story is important, because investors will rarely be nudged to action by packed PowerPoint slides or dense spreadsheets but, instead, will be persuaded by how well a business's story feels deep down, i.e., one's gut response. In many cases, investors are often attracted to an established business or business idea via a relatable brand story – even when the facts and figures say otherwise – because it helps them connect the dots much easier.
There are tons of resources online that can help the average business build a good brand story. A key requirement, however, is that you have an internal and external view of your business so you're able to address things like investor demographics, how your current story relates with investors, and, more importantly, your strategic vision.
Determine a suitable funding platform
Over the past couple of years, fintech has spurred the growth of new funding platforms while improving most of the existing platforms. In addition to ICOs, new funding models, such as crowdfunding and P2P lending, have transformed the business financing landscape for startups and small businesses.
But just because these funding platforms are out there doesn't mean any of them will be a good fit. One of the biggest reasons why SMBs fail to attract investors is the failure to align their business models with an appropriate funding platform or investor profile. While it's natural for businesses to keep their options open when it comes to finding an investor or securing funding, making the same pitch to different investors is casting too wide a net and is most likely to fail to pique the interest of investors.
Investors and lending platforms will often vary greatly, which requires you to align your business model and core mission with a specific type of investor. For instance, ICOs, which have grown wildly popular over the past few years, can be a good option for any business when done correctly. However, with over 80 percent of ICOs turning out to be scams, investors are turning their attention to businesses with active products and services and not merely the promise of a brighter future.
And while an angel or venture capital firm will seek to support a small business every once in a while, they'll usually want to partner with a business that has a history of success within a specific niche, which can be a tall task for a fairly young business.
So, if you were fortunate enough to land sufficient funds to build your business, concentrate on building your brand, keeping in mind the kind of investors you'd want to bring in. When the time is right, the right investor with a genuine interest will come calling.